United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 96-2548

No. 96-2766

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Package Service Company, Inc., *

*

Petitioner/Cross-Respondent, *

*

v. *

* Appeals from the National

National Labor Relations Board, * Labor Relations Board.

*

Respondent/Cross-Petitioner, *

*

United Steelworkers of America, *

*

Intervenor. *

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Submitted: January 13, 1997

Filed: May 14, 1997

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Before LOKEN, BRIGHT, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

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LOKEN, Circuit Judge.

This appeal concerns the back pay remedy under the National Labor Relations

Act, 29 U.S.C. §§ 151 et seq. Kansas City-based Package Service Company, Inc.

("PSC"), purchased the assets of a distressed Pittsburgh printing company and
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transferred them to a newly-formed subsidiary. In attempting to revive the business,

PSC’s subsidiary committed several unfair labor practices. The National Labor

Relations Board (the "Board") ordered back pay for adversely affected workers. In a

subsequent proceeding, after the acquired business had ceased operations, the Board

imposed back pay liability on PSC, the surviving parent. PSC appeals. We conclude

that parental liability is appropriate on the facts of this case and therefore grant the

Board’s petition to enforce.

I.

PSC’s subsidiary, Allegheny Graphics, Inc. (“Graphics”), acquired the assets of

Allegheny Label, Inc., hoping to turn around the business in part by making Graphics

a non-union employer. Graphics refused to bargain with the United Steelworkers of

America, the collective bargaining representative of Allegheny Label’s work force.

The union filed unfair labor practice charges, and the Board issued a complaint against

Graphics. The charges were tried in Pittsburgh in March 1991. 

Graphics permanently closed the Allegheny Label facility in March 1992 for

business reasons. Three months later, the Board issued its decision, holding that

Graphics as Allegheny Label’s successor violated §§ 8(a)(3) and 8(a)(5) of the NLRA

by setting terms of employment without consulting the union, by informing job

applicants that Graphics was a non-union employer that would not hire union

supporters, and by refusing to hire thirteen Allegheny Label employees because of their

union affiliation. The Board ordered Graphics to reinstate the thirteen employees with

back pay; it ordered additional back pay to compensate all employees at the levels

prescribed in Allegheny Label’s collective bargaining agreement until Graphics ceased

operations. The Third Circuit enforced that order. NLRB v. Allegheny Graphics, 993

F.2d 878 (3d Cir. 1993)(Table).
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When the parties failed to settle back pay issues, the Board issued a back pay

specification, alleging that PSC should be liable for all back pay awarded because PSC

and Graphics “constitute a single integrated business enterprise and a single employer

and/or joint employer within the meaning of the [NLRA].” After an evidentiary

hearing, the administrative law judge issued a supplemental decision holding PSC liable

for the back pay awarded because PSC and Graphics were a "single employer." The

Board affirmed, ordering PSC and Graphics to pay $318,287 in back pay. PSC

appeals, challenging only the Board's single employer decision.

II.

Because businesses have great organizational flexibility, it is often necessary to

determine whether the “employer,” for NLRA purposes, is simply the legal entity that

pays wages and benefits to the employees in question. In a variety of contexts the

Board is called upon to determine whether multiple facilities owned by one corporation

or by two or more affiliated corporations should be considered a single employer, an

issue on which the general definition in 29 U.S.C. § 152(2) casts little light. For

example, in Radio & T.V. Broad. Technicians Local 1264 v. Broadcast Serv. of

Mobile, Inc., 380 U.S. 255 (1965), commonly owned broadcasting stations were found

to be a single employer whose revenues could be combined for purposes of the Board’s

jurisdiction; that in turn resulted in the preemption of state court litigation. More

commonly, the single employer issue arises in bargaining disputes -- if the Board

determines that separate corporations or facilities are a single employer whose

employees may be placed in the same collective bargaining unit, it then must resolve

the ultimate issue whether those employees are in fact an appropriate unit. See South

Prairie Constr. Co. v. Local No. 627, IUOE, 425 U.S. 800, 802-03 (1976); Marine

Welding & Repair Works, Inc. v. NLRB, 439 F.2d 395, 397 (8th Cir. 1971). In this

case, the single employer issue is relevant in determining whether PSC should be liable

for the unfair labor practices of its insolvent subsidiary, Graphics. 
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In resolving single employer issues, the Board has developed a broad and general

test:

the board considers whether their total relationship reveals: (1) some

functional interrelation of operations, (2) centralized control of labor

relations, (3) common management, and (4) common ownership or

financial control. While none of these factors, separately viewed, ha[s]

been held controlling, stress has normally been laid upon the first

three . . . .

Pulitzer Pub. Co. v. NLRB, 618 F.2d 1275, 1279 (8th Cir.), cert. denied, 449 U.S. 875

(1980), quoting Parklane Hosiery Co., 203 N.L.R.B. 597, 612 (1973). This general test

based upon four non-controlling factors is not adequate to resolve a case such as this

unless the Board explains why its single employer finding, without more, is sufficient

to decide the ultimate issue of parent corporation liability. For example, if the ultimate

issue had been whether employees of PSC and Graphics in Kansas City and Pittsburgh

were an appropriate collective bargaining unit, the ALJ’s single employer finding would

clearly not have been sufficient to decide that issue. See NLRB v. DMR Corp., 699

F.2d 788, 791-93 (5th Cir.), cert. denied, 464 U.S. 852 (1983); 

In deciding whether a parent corporation is liable for its subsidiary’s unfair labor

practices, the Board cannot ignore the general principle that “[t]he insulation of a

stockholder from the debts and obligations of his corporation is the norm, not the

exception.” NLRB v. Deena Artware, Inc., 361 U.S. 398, 403 (1960). Yet the

Board’s general single employer test is so broad that it could literally apply in virtually

all cases in which affiliated corporations have common ownership and management and

significantly integrated operations. Thus, if the Board relies on its determination of the
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single employer issue in this kind of case, it must emphasize those factors that make

it appropriate to impose derivative unfair practice liability on a corporate parent, as it

did in Royal Typewriter Co. v. NLRB, 533 F.2d 1030, 1042-43 (8th Cir. 1976). But

here, the ALJ simply reviewed the four single employer factors without explaining their

relative significance. Because this generalized single employer analysis does not

satisfactorily explain why PSC is liable for Graphics’s unfair labor practices, we must

examine more closely whether the Board properly overrode normal principles of limited

liability in assessing back pay against PSC.

III.

Corporate law recognizes situations in which it is appropriate to “pierce the veil”

of separate affiliates. See, e.g., H.J., Inc. v. International Tel. & Tel. Corp., 867 F.2d

1531, 1549 (8th Cir. 1989). It is well settled that the Board in applying the federal

labor laws may do likewise. Deena Artware reflects one such situation, where assets

and jobs were transferred among affiliates to frustrate an outstanding back pay

obligation. See 361 U.S. at 413-14 (Frankfurter, J., concurring). In this case, there

was no such duplicity. It is undisputed that Graphics closed because of economic

adversity, not to evade its unfair labor practice obligations. Thus, the basis for holding

PSC liable must be found in the nature of those unfair practices when committed.

A number of circuit court cases, dating from the early years of the NLRA, have

held that a corporate owner who controls and directs labor relations without regard to

the corporate entity may be liable for remedying the corporation’s unfair labor

practices. See NLRB v. International Measurement & Control Co., 978 F.2d 334, 340
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(7th Cir. 1992) (“perhaps the ‘employer’ is he who calls the tune, and not just whoever

pays the piper”); Great Chinese Amer. Sewing Co. v. NLRB, 578 F.2d 251, 255 (9th

Cir. 1978); NLRB v. Condenser Corp., 128 F.2d 67, 71 (3d Cir. 1942) (“[w]hat is

important . . . is the degree of control over the labor relations”); NLRB v. Swift & Co.,

127 F.2d 30, 32 (6th Cir. 1942); NLRB v. Lund, 103 F.2d 815, 818 (8th Cir. 1939).

In Royal Typewriter, for example, a subsidiary of Litton Industries committed

unfair labor practices by refusing to bargain about the effects of a contemplated plant

closing. Invoking the single employer doctrine, the Board ordered Litton to participate

in prospective relief such as preferential hiring because Litton made the decision to

close the plant and controlled the labor negotiations that surrounded that decision. In

enforcing this order, we stated:

We do not think that a conglomerate can act in negotiations as a

single employer and then expect to avoid the consequences if unfair labor

practice charges result from such conduct. 

533 F.2d at 1043. Here, PSC’s acquisition strategy included making Graphics a nonunion employer, and key executives of PSC personally implemented that strategy,

committing in the process the unfair labor practices underlying this back pay award.

PSC argues that it did not control day-to-day labor relations after the Graphics facility

was initially staffed. But PSC’s control over its subsidiary’s conduct in committing

unfair labor practices is the critical factor. See Penntech Papers, Inc. v. NLRB, 706

F.2d 18, 26 (1st Cir.), cert. denied, 464 U.S. 892 (1983).
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Unless the back pay remedy is used punitively, “[t]he Board’s broad remedial

power to order compensation for lost pay [may be] exercised not only to remedy the

consequences of an unfair labor practice, but also in aid of the Board’s authority to

deter unfair labor practices.” NLRB v. United Marine Div., Local 333, Nat’l Maritime

Union, 417 F.2d 865, 868 (2d Cir. 1969), cert. denied, 397 U.S. 1008 (1970). Here,

the back pay provides a compensatory remedy to workers adversely affected by the

unfair labor practices. In addition, making PSC liable for that back pay places

responsibility for the remedy on the party actually responsible for the unlawful conduct,

thereby helping to deter corporate owners who might otherwise implement an unlawful

labor relations strategy through a newly-formed, undercapitalized subsidiary. So long

as the Board limits imposition of this kind of derivative liability to situations in which

the corporate parent has “exercise[d] direct control over a specific transaction,”

Esmark, Inc. v. NLRB, 887 F.2d 739, 757 (7th Cir. 1989), its remedial order should

be enforced.

The record contains substantial evidence of a single employer relationship

between PSC and Graphics justifying the Board’s decision to hold PSC derivatively

liable. See Allegheny Graphics, Inc., 320 N.L.R.B. No. 146 at 2-4 (Apr. 15, 1996).

We deny PSC’s petition for review and grant the Board’s cross-petition to enforce.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.